UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

Investment Company Act File Number:		811-21187
Registrant Name:		PIMCO Municipal Income Fund III
Address of Principal Executive Offices:		1345 Avenue of the Americas,
		New York, NY 10105
Name and Address of Agent for Service:		Lawrence G. Altadonna
		1345 Avenue of the Americas,
		New York, NY 10105
Registrant’s telephone number, including area code:		212-739-3371
Date of Fiscal Year End:		September 30, 2010
Date of Reporting Period:		December 31, 2009

Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (§§ 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to the Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-2001. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

 

 

Item 1. Schedule of Investmets

PIMCO Municipal Income Fund III Schedule of Investments

December 31, 2009 (unaudited)

Principal
Amount						Credit Rating
(000s)						(Moody’s/S&P)				Value*
MUNICIPAL BONDS & NOTES—97.3%
				Alabama—1.1%
$	5,000			Birmingham Baptist Medical Centers Special Care Facs. Financing Auth. Rev.,
				Baptist Health Systems, Inc., 5.00%, 11/15/30, Ser. A		Baa2/NR				$	4,134,750
	500			Birmingham Special Care Facs. Financing Auth. Rev., Childrens Hospital, 6.00%, 6/1/39		Aa3/AAA					526,380
	1,500			Colbert Cnty. Northwest Health Care Auth. Rev., 5.75%, 6/1/27		Baa3/NR					1,410,420
											6,071,550
				Alaska—1.3%
				Housing Finance Corp. Rev.,
	3,900			5.00%, 12/1/33, Ser. A		Aaa/AAA					3,873,987
	1,000			5.25%, 6/1/32, Ser. C (NPFGC)		Aa2/AA					1,005,290
	3,100			Northern Tobacco Securitization Corp. Rev., 5.00%, 6/1/46, Ser. A		Baa3/NR					2,029,601
											6,908,878
				Arizona—5.1%
				Health Facs. Auth. Rev.,
				Banner Health,
	1,250			5.00%, 1/1/35, Ser. A		NR/A+					1,196,712
	900			5.50%, 1/1/38, Ser. D		NR/A+					911,007
	2,250			Beatitudes Campus Project, 5.20%, 10/1/37		NR/NR					1,635,008
	1,500			Maricopa Cnty. Pollution Control Corp. Rev., Palo Verde Project, 5.05%, 5/1/29, Ser. A (AMBAC)		Baa2/BBB-					1,396,545
	13,000			Pima Cnty. Industrial Dev. Auth. Rev., 5.00%, 9/1/39		Aa2/AA					12,665,770
	5,000			Salt River Project Agricultural Improvement & Power Dist. Rev., 5.00%, 1/1/39, Ser. A (h)		Aa1/AA					5,220,650
	5,600			Salt Verde Financial Corp. Rev., 5.00%, 12/1/37		A3/A					4,761,904
											27,787,596
				California—5.9%
	2,500			Health Facs. Financing Auth. Rev., Catholic Healthcare West, 6.00%, 7/1/39, Ser. A		A2/A					2,644,425
	1,250			Palomar Pomerado Health, CP, 6.75%, 11/1/39 State, GO,		Baa2/NR					1,245,225
	250			5.00%, 11/1/37		Baa1/A					225,158
	5,300			5.00%, 12/1/37		Baa1/A					4,780,388
	6,000			6.00%, 4/1/38		Baa1/A					6,118,620
				Statewide Communities Dev. Auth. Rev.,
	2,800			Baptist Univ., 9.00%, 11/1/17, Ser. B (a)(c)		NR/NR					2,318,904
				Methodist Hospital Project (FHA),
	2,900			6.625%, 8/1/29		Aa2/AA					3,276,014
	10,300			6.75%, 2/1/38		Aa2/AA					11,573,801
											32,182,535
				Colorado—3.0%
	9,955			Colorado Springs Utilities Rev., 5.00%, 11/15/30, Ser. B (h)		Aa2/AA					10,404,269
	500			Confluence Metropolitan Dist. Rev., 5.45%, 12/1/34		NR/NR					354,535
	500			Health Facs. Auth. Rev., Evangelical Lutheran, 6.125%, 6/1/38, Ser. A		A3/A-					495,645
	1,500			Housing & Finance Auth. Rev., Evergreen Country Day School, Inc. Project, 5.875%, 6/1/37 (a)(c)		NR/BB					1,026,795
	500			Public Auth. for Colorado Energy Rev., 6.50%, 11/15/38		A2/A					527,650
	4,000			Saddle Rock Metropolitan Dist., GO, 5.35%, 12/1/31 (Radian)		NR/NR					3,375,960
											16,184,854

PIMCO Municipal Income Fund III Schedule of Investments
December 31, 2009 (unaudited)

Principal
Amount						Credit Rating
(000s)						(Moody’s/S&P)				Value*
				District of Columbia—2.0%
$	10,000			Dist. of Columbia Water & Sewer Auth. Rev., 5.50%, 10/1/39, Ser. A (h)		Aa3/AA				$	10,858,000
				Florida—5.2%
	3,480			Brevard Cnty. Health Facs. Auth. Rev., Health First, Inc. Project, 5.00%, 4/1/34		A3/A-					3,175,256
	500			Broward Cnty. Airport Rev., 5.375%, 10/1/29, Ser. O		A1/A+					513,495
	4,500			Broward Cnty. Water & Sewer Rev., 5.25%, 10/1/34, Ser. A (h)		Aa3/AA					4,681,845
	2,500			Hillsborough Cnty. Industrial Dev. Auth. Rev., Tampa General Hospital Project, 5.25%, 10/1/34, Ser. B		A3/NR					2,364,200
	1,485			Julington Creek Plantation Community Dev. Dist., Special Assessment, 5.00%, 5/1/29 (NPFGC)		Baa1/A					1,382,164
	1,000			Miami-Dade Cnty. Airport Rev., 5.50%, 10/1/36, Ser. A		A2/A-					1,016,490
	3,895			Sarasota Cnty. Health Facs. Auth. Rev., 5.75%, 7/1/45		NR/NR					2,964,874
	4,200			State Board of Education, GO, 5.00%, 6/1/38, Ser. D (h)		Aa1/AAA					4,330,116
	6,900			State Board of Governors Rev., Florida Univ., 6.50%, 7/1/33		Aa2/AA					7,911,747
											28,340,187
				Georgia—0.3%
	1,750			Fulton Cnty. Residential Care Facs. for the Elderly Auth. Rev., Lenbrook Project, 5.125%, 7/1/42, Ser. A		NR/NR					1,135,050
	400			Medical Center Hospital Auth. Rev., Spring Harbor Green Island Project, 5.25%, 7/1/37		NR/NR					307,552
											1,442,602
				Idaho—1.2%
				State Building Auth. Rev., Ser. A (XLCA),
	1,000			5.00%, 9/1/33		NR/AA-					1,012,430
	5,750			5.00%, 9/1/43		NR/AA-					5,786,282
											6,798,712
				Illinois—8.1%
	500			Chicago Board of Education School Reform, GO,
				zero coupon, 12/1/28, Ser. A (FGIC-NPFGC)		A1/AA-					186,695
				Chicago, GO,
	720			5.00%, 1/1/31, Ser. A (NPFGC)		Aa3/AA-					732,370
	5,000			5.00%, 1/1/34, Ser. C (h)		Aa3/AA-					5,043,200
				Chicago Motor Fuel Tax Rev., Ser. A,
	7,000			5.00%, 1/1/33 (AMBAC)		A1/AA+					7,089,180
	500			5.00%, 1/1/38		Aa3/AAA					514,245
				Educational Facs. Auth. Rev., Univ. of Chicago, Ser. A,
	4,780			5.00%, 7/1/33		Aa1/AA					4,867,092
	165			5.25%, 7/1/41		Aa1/AA					168,112
				Finance Auth. Rev.,
				Leafs Hockey Club Project, Ser. A (b),
	1,000			5.875%, 3/1/27		NR/NR					304,000
	625			6.00%, 3/1/37		NR/NR					189,156
	400			OSF Healthcare System, 7.125%, 11/15/37, Ser. A		A2/A					444,540
	12,795			Peoples Gas Light & Coke Co., 5.00%, 2/1/33 (AMBAC)		A2/A-					12,921,287
	5,000			Univ. of Chicago, 5.50%, 7/1/37, Ser. B (h)		Aa1/AA					5,538,950
	1,175			Health Facs. Auth. Rev., Elmhurst Memorial Healthcare, 5.50%, 1/1/22		Baa1/NR					1,147,810
	5,000			State Toll Highway Auth. Rev., 5.50%, 1/1/33, Ser. B		Aa3/AA-					5,377,400
											44,524,037

PIMCO Municipal Income Fund III Schedule of Investments
December 31, 2009 (unaudited)

Principal
Amount						Credit Rating
(000s)						(Moody’s/S&P)				Value*
				Indiana—1.4%
$	3,500			Dev. Finance Auth. Rev., 5.00%, 3/1/30, Ser. B (AMBAC)		A2/A				$	3,430,105
	1,375			Fort Wayne Pollution Control Rev., General Motors Corp. Project, 6.20%, 10/15/25 (d)		NR/NR					261,250
	1,250			Indianapolis Local Public Improvement Bond Bank, Tax Allocation, 5.00%, 2/1/29, Ser. G (NPFGC)		Baa1/AA					1,260,200
	1,000			Plainfield Parks Facs. Corp. Rev., 5.00%, 1/15/22 (AMBAC)		NR/A					1,014,980
				Portage, Tax Allocation, Ameriplex Project,
	1,000			5.00%, 7/15/23		NR/BBB+					915,170
	775			5.00%, 1/15/27		NR/BBB+					680,248
											7,561,953
				Iowa—1.8%
				Finance Auth. Rev., Deerfield Retirement Community, Inc., Ser. A,
	120			5.50%, 11/15/27		NR/NR					86,863
	575			5.50%, 11/15/37		NR/NR					381,869
	11,010			Tobacco Settlement Auth. Rev., 5.60%, 6/1/34, Ser. B		Baa3/BBB					9,446,250
											9,914,982
				Kentucky—0.6%
				Economic Dev. Finance Auth. Rev.,
				Baptist Healthcare Systems, Ser. A,
	1,000			5.375%, 8/15/24		Aa3/NR					1,103,720
	1,300			5.625%, 8/15/27		Aa3/NR					1,414,062
	1,000			Catholic Healthcare Partners, 5.25%, 10/1/30		A1/AA-					998,660
											3,516,442
				Louisiana—0.5%
	1,700			Public Facs. Auth. Rev., Ochsner Clinic Foundation Project,
				5.50%, 5/15/47, Ser. B		Baa1/NR					1,561,994
	1,595			Tobacco Settlement Financing Corp. Rev., 5.875%, 5/15/39, Ser. 2001-B		Baa3/BBB					1,464,928
											3,026,922
				Maryland—0.3%
	1,500			Health & Higher Educational Facs. Auth. Rev., Calvert Health System, 5.50%, 7/1/36		A2/NR					1,517,190
				Massachusetts—1.3%
	750			Dev. Finance Agcy. Rev., Linden Ponds, Inc. Fac., Ser. A, 5.75%, 11/15/35		NR/NR					548,865
	4,910			Housing Finance Agcy. Rev., 5.125%, 6/1/43, Ser. H		Aa3/AA-					4,918,249
	1,600			State College Building Auth. Rev., 5.50%, 5/1/39, Ser. A		Aa3/AA-					1,720,592
											7,187,706
				Michigan—14.7%
	500			Conner Creek Academy East Rev., 5.25%, 11/1/36		NR/BB+					357,480
	9,320			Detroit Sewer Rev., 5.00%, 7/1/32, Ser. A (FSA)		Aa3/AAA					9,122,882
				Detroit Water Rev. (NPFGC),
	30,000			5.00%, 7/1/34, Ser. A		A2/A+					27,994,800
	7,555			5.00%, 7/1/34, Ser. B		A3/A					7,147,105
	1,500			Royal Oak Hospital Finance Auth. Rev., William Beaumont Hospital, 8.25%, 9/1/39		A1/A					1,774,005

PIMCO Municipal Income Fund III Schedule of Investments
December 31, 2009 (unaudited)

Principal
Amount						Credit Rating
(000s)						(Moody’s/S&P)				Value*
				Michigan (continued)
				State Hospital Finance Auth. Rev.,
$	175			Detroit Medical Center, 5.25%, 8/15/23, Ser. A		Ba3/BB-				$	138,094
				Oakwood Group, Ser. A,
	5,405			5.75%, 4/1/32		A2/A					5,261,876
	575			6.00%, 4/1/22		A2/A					581,492
	20,000			Trinity Health Credit, 5.375%, 12/1/30, Ser. C		Aa2/AA					20,226,200
	10,000			Tobacco Settlement Finance Auth. Rev., 6.00%, 6/1/48, Ser. A		NR/BBB					7,622,000
											80,225,934
				Mississippi—0.8%
				Business Finance Corp. Rev., System Energy Res., Inc. Project,
	3,000			5.875%, 4/1/22		Ba1/BBB					2,999,670
	1,250			5.90%, 5/1/22		Ba1/BBB					1,250,162
											4,249,832
				Missouri—0.3%
	1,350			St. Louis Cnty. Industrial Dev. Auth. Rev., Southfield & Oak Apartments, 5.20%, 1/20/36, Ser. A (GNMA)		NR/AAA					1,360,220
	250			Township of Jennings Rev., Northland Redev. Area Project, 5.00%, 11/1/23		NR/NR					211,217
											1,571,437
				Montana—1.7%
	9,500			Forsyth Pollution Control Rev., Puget Sound Energy, 5.00%, 3/1/31, Ser. A (AMBAC)		Baa1/A-					9,104,515
				Nevada—0.7%
	4,000			Clark Cnty., GO, 4.75%, 6/1/30 (FSA)		Aa1/AAA					4,004,200
				New Hampshire—0.4%
	2,000			Business Finance Auth. Rev., Elliot Hospital, 6.125%, 10/1/39		Baa1/BBB+					1,963,540
				New Jersey—4.5%
	1,000			Camden Cnty. Improvement Auth. Rev., Cooper Health Systems Group, 5.00%, 2/15/35, Ser. A		Baa3/BBB					783,610
	300			Economic Dev. Auth. Rev., Newark Airport Marriott Hotel, 7.00%, 10/1/14		Ba1/NR					300,672
	4,500			Economic Dev. Auth., Special Assessment, Kapkowski Road Landfill Project, 6.50%, 4/1/28		Baa3/NR					4,023,270
				Health Care Facs. Financing Auth. Rev.,
	1,075			Pascack Valley Hospital Assoc., 6.625%, 7/1/36 (d)		NR/D					16,131
	1,000			St. Peters Univ. Hospital, 5.75%, 7/1/37		Baa2/BBB-					979,710
	1,150			Trinitas Hospital, 5.25%, 7/1/30, Ser. A		Baa3/BBB-					954,465
	2,000			State Turnpike Auth. Rev., 5.25%, 1/1/40, Ser. E		A3/A+					2,062,100
	22,645			Tobacco Settlement Financing Corp. Rev., 5.00%, 6/1/41, Ser. 1-A		Baa3/BBB					15,640,902
											24,760,860
				New Mexico—0.2%
	1,000			Farmington Pollution Control Rev., 5.80%, 4/1/22, Ser. A		Baa3/BB+					1,000,480

PIMCO Municipal Income Fund III Schedule of Investments
December 31, 2009 (unaudited)

Principal
Amount						Credit Rating
(000s)						(Moody’s/S&P)				Value*
				New York—4.6%
$	1,700			Liberty Dev. Corp. Rev., Goldman Sachs Headquarters, 5.50%, 10/1/37		A1/A				$	1,731,535
	1,250			Metropolitan Transportation Auth. Rev., 5.00%, 11/15/34, Ser. B		NR/AA					1,294,213
	1,150			Nassau Cnty. Industrial Dev. Agcy. Rev., Amsterdam at Harborside, 6.70%, 1/1/43, Ser. A		NR/NR					1,010,528
	10,450			New York City Industrial Dev. Agcy. Rev., Yankee Stadium, 7.00%, 3/1/49		Aa3/AAA					12,178,012
				New York City Municipal Water Finance Auth. Water & Sewer Rev.,
	4,900			5.00%, 6/15/37, Ser. D (h)		Aa2/AAA					5,021,716
	4,000			Second Generation Resolutions, 4.75%, 6/15/35, Ser. DD (h)		Aa3/AA+					4,024,800
											25,260,804
				North Carolina—1.1%
				Eastern Municipal Power Agcy. Rev.,
	2,000			5.125%, 1/1/23, Ser. D		Baa1/A-					2,039,580
	2,000			5.125%, 1/1/26, Ser. D		Baa1/A-					2,027,860
	795			5.375%, 1/1/17, Ser. C		Baa1/A-					841,770
	1,500			Medical Care Commission Rev., Cleveland Cnty. Healthcare, 5.00%, 7/1/35, Ser. A (AMBAC)		NR/A					1,319,250
											6,228,460
				Ohio—4.2%
	15,375			Air Quality Dev. Auth. Pollution Control Rev., Dayton Power, 4.80%, 1/1/34, Ser. B (FGIC)		Aa3/A					15,619,309
	5,000			Buckeye Tobacco Settlement Financing Auth. Rev., 5.875%, 6/1/47, Ser. A-2		Baa3/BBB					3,765,200
	2,500			Lorain Cnty. Hospital Rev., Catholic Healthcare, 5.375%, 10/1/30		A1/AA-					2,500,725
	500			Montgomery Cnty. Rev., Miami Valley Hospital, 6.25%, 11/15/39, Ser. A		Aa3/NR					521,155
	500			State Higher Educational Fac. Commission Rev., Univ. Hospital Health Systems, 6.75%, 1/15/39, Ser. A		A2/A					531,155
											22,937,544
				Pennsylvania—2.6%
	1,000			Allegheny Cnty. Hospital Dev. Auth. Rev., Univ. of Pittsburgh Medical Center, 5.625%, 8/15/39		Aa3/A+					1,009,910
				Cumberland Cnty. Municipal Auth. Rev., Messiah Village Project, Ser. A,
	750			5.625%, 7/1/28		NR/BBB-					633,000
	670			6.00%, 7/1/35		NR/BBB-					574,659
	1,000			Dauphin Cnty. General Auth. Rev., Pinnacle Health System Project, 6.00%, 6/1/36, Ser. A		A2/A					1,023,730
	1,250			Harrisburg Auth. Rev., Harrisburg Univ. of Science, 6.00%, 9/1/36, Ser. B		NR/NR					1,086,362
	100			Luzerne Cnty. Industrial Dev. Auth. Rev., Pennsylvania American Water Co., 5.50%, 12/1/39		A2/A					101,751
	6,200			Philadelphia Hospitals & Higher Education Facs. Auth. Rev.,
				Temple Univ. Hospital, 6.625%, 11/15/23, Ser. A		Baa3/BBB					6,203,348
	500			Philadelphia Water Rev., 5.25%, 1/1/36, Ser. A		A3/A					505,710
	3,000			Turnpike Commission Rev., 5.125%, 12/1/40, Ser. D		A2/A-					3,010,260
											14,148,730
				South Carolina—1.1%
	1,000			Greenwood Cnty. Rev., Self Regional Healthcare, 5.375%, 10/1/39		A2/A					980,270
	5,305			Jobs-Economic Dev. Auth. Rev., Bon Secours Health System, 5.625%, 11/15/30, Ser. B		A3/A-					5,218,263
											6,198,533

PIMCO Municipal Income Fund III Schedule of Investments
December 31, 2009 (unaudited)

Principal
Amount						Credit Rating
(000s)						(Moody’s/S&P)				Value*
				Tennessee—0.5%
$	1,250			Claiborne Cnty. Industrial Dev. Rev., Board Lincoln Memorial Univ.,
				6.625%, 10/1/39		NR/NR				$	1,223,625
				Tennessee Energy Acquisition Corp. Rev., Ser. A,
	1,200			5.25%, 9/1/21		Ba3/BB+					1,211,376
	365			5.25%, 9/1/22		Ba3/BB+					366,650
											2,801,651
				Texas—10.5%
	6,810			Crowley Independent School Dist., GO, 4.75%, 8/1/35 (PSF-GTD)		Aaa/AAA					6,909,562
	1,300			Dallas Civic Center Rev., 5.25%, 8/15/38		Aa3/AAA					1,327,469
	10,115			Denton Independent School Dist., GO, 5%, 8/15/33 (PSF-GTD) (h)		Aaa/AAA					10,347,645
	465			Judson Independent School Dist., GO, 5.00%, 2/1/30 (PSF-GTD)		Aaa/NR					470,292
				Municipal Gas Acquisition & Supply Corp. I Rev.,
	150			5.25%, 12/15/26, Ser. A		A2/A					144,774
	8,100			6.25%, 12/15/26, Ser. D		A2/A					8,745,003
				North Harris Cnty. Regional Water Auth. Rev.,
	5,500			5.25%, 12/15/33		A3/A+					5,613,905
	5,500			5.50%, 12/15/38		A3/A+					5,648,280
				North Texas Tollway Auth. Rev.,
	10,800			5.625%, 1/1/33, Ser. A		A2/A-					11,089,656
	700			5.75%, 1/1/33, Ser. F		A3/BBB+					717,542
	2,000			6.25%, 1/1/39, Ser. A		A2/A-					2,122,680
	2,000			Sabine River Auth. Pollution Control Rev., 5.20%, 5/1/28, Ser. C		Caa3/CCC					1,069,900
	3,000			Tarrant Cnty. Cultural Education Facs. Finance Corp. Rev.,
				Baylor Health Care Systems Project, 6.25%, 11/15/29		Aa2/AA-					3,214,500
											57,421,208
				Virginia—0.3%
	1,000			Fairfax Cnty. Industrial Dev. Auth. Rev., Inova Health Systems,
				5.50%, 5/15/35, Ser. A		Aa2/AA+					1,048,370
	1,000			James City Cnty. Economic Dev. Auth. Rev., United Methodist Homes,
				5.50%, 7/1/37, Ser. A		NR/NR					565,700
											1,614,070
				Washington—7.8%
	6,375			Chelan Cnty. Public Utility Dist. No. 1 Rev., Chelan Hyrdo Systems, 5.125%, 7/1/33, Ser. C (AMBAC)		Aa2/AA					6,508,237
	1,000			Health Care Facs. Auth. Rev., Seattle Cancer Care Alliance, 7.375%, 3/1/38		A3/NR					1,104,550
	15,000			King Cnty. Sewer Rev., 5.00%, 1/1/35, Ser. A (FSA) (h)		Aa3/AAA					15,203,400
	20,005			Tobacco Settlement Auth. Rev., 6.50%, 6/1/26		Baa3/BBB					20,124,230
											42,940,417
				Wisconsin—2.2%
	1,000			Health & Educational Facs. Auth. Rev., Prohealth Care, Inc., 6.625%, 2/15/39		A1/A+					1,071,540
	10,000			State Rev., 6.00%, 5/1/36, Ser. A		A1/AA-					11,090,600
											12,162,140
				Total Municipal Bonds & Notes (cost—$527,389,560)							532,418,501
VARIABLE RATE NOTES (a)(c)(f) —1.6%
				California—0.3%
	1,675			Los Angeles Community College Dist., GO, 13.56%, 8/1/33, Ser. 3096 (e)		NR/AA					1,719,555

PIMCO Municipal Income Fund III Schedule of Investments
December 31, 2009 (unaudited)

Principal

Amount

Credit Rating

(000s)

(Moody’s/S&P)

Value*

Texas—1.3%

$

6,500

JPMorgan Chase Putters/Drivers Trust, GO, 9.227%, 2/1/17, Ser. 3480

NR/AA+

$

7,079,605

Total Variable Rate Notes (cost—$8,138,648)

8,799,160

SHORT-TERM INVESTMENTS (g)—1.1%

Corporate Notes—1.1%

Financial Services—1.1%

International Lease Finance Corp., FRN,

700

0.482%, 5/24/10

B1/BBB+

680,569

600

0.684%, 1/15/10

B1/BBB+

598,445

5,000

SLM Corp., 0.442%, 7/26/10, FRN

Ba1/BBB-

4,893,410

Total Corporate Notes (cost—$5,998,897)

6,172,424

Total Investments (cost—$541,527,105)—100.0%

$

547,390,085

Glossary:

AMBAC—insured by American Municipal Bond Assurance Corp.
CP—Certificates of Participation
FGIC—insured by Financial Guaranty Insurance Co.
FHA—insured by Federal Housing Administration
FRN—Floating Rate Note. The interest rate disclosed reflects the rate in effect on December 31, 2009.
FSA—insured by Financial Security Assurance, Inc.
GNMA—insured by Government National Mortgage Association
GO—General Obligation Bond
GTD—Guaranteed
NPFGC—insured by National Public Finance Guarantee Corporation
NR—Not Rated
PSF—Public School Fund
Radian—insured by Radian Guaranty, Inc.
XLCA—insured by XL Capital Assurance

Open reverse repurchase agreements at December 31, 2009:

Counterparty		Rate				Trade Date				Maturity Date				Principal & Interest				Principal
Barclays Bank			0.65	%			12/4/09				1/7/10			$	4,605,327			$	4,603,000
Credit Susse First Boston			0.55	%			12/7/09				1/12/10				1,175,448				1,175,000
																		$	5,778,000

The weighted average daily balance of reverse repurchase agreements outstanding during the three months ended December 31, 2009 was $5,483,033 at a weighted average interest rate of 0.64%. The total market value of underlying collateral (refer to the Schedule of Investments for positions segregated as collateral for reverse repurchase agreements) for open reverse repurchase agreements at December 31, 2009 was $6,172,424.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the “exit price”) in an orderly transaction between market participants. The three levels of the fair value hierarchy are described below:

	•		Level 1 — quoted prices in active markets for identical investments that the Fund has the ability to access
	•		Level 2 — valuations based on other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) or quotes from inactive exchanges
	•		Level 3 — valuations based on significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

An investment asset’s or liability’s level within the fair value hierarchy is based on the lowest level input, individually or in the aggregate, that is significant to fair value measurement. The objective of fair value measurement remains the same even when there is a significant decrease in the volume and level of activity for an asset or liability and regardless of the valuation technique used.

The valuation techniques used by the Fund to measure fair value during the three months ended December 31, 2009 maximized the use of observable inputs and minimized the use of unobservable inputs.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

A summary of the inputs used at December 31, 2009 in valuing the Fund’s assets and liabilities is listed below:

						Level 2 -				Level 3 -
						Other Significant				Significant
		Level 1 -				Observable				Unobservable				Value at
		Quoted Prices				Inputs				Inputs				12/31/09
Investments in Securities — Assets
Municipal Bonds & Notes			—			$	532,418,501				—			$	532,418,501
Variable Rate Notes			—				8,799,160				—				8,799,160
Short — Term Investments			—				6,172,424				—				6,172,424
Total Investments			—			$	547,390,085				—			$	547,390,085

Item 2. Controls and Procedures

(a) The registrant’s President & Chief Executive Officer and Treasurer, Principal Financial & Accounting Officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a -3(c))), are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.

(b) There were no significant changes in the registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a -3(d))) that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 3. Exhibits

     (a) Exhibit 99.302 Cert. — Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Registrant: PIMCO Municipal Income Fund III

By		/s/ Brian S. Shlissel
President & Chief Executive Officer
Date: February 23, 2010
By		/s/ Lawrence G. Altadonna
Treasurer, Principal Financial & Accounting Officer
Date: February 23, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By		/s/ Brian S. Shlissel
President & Chief Executive Officer
Date: February 23, 2010
By		/s/ Lawrence G. Altadonna
Treasurer, Principal Financial & Accounting Officer
Date: February 23, 2010

Exhibit 99.CERT

CERTIFICATIONS

I, Brian S. Shlissel, certify that:

1.		I have reviewed this report on Form N-Q of PIMCO Municipal Income Fund III;
2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.		Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed;
4.		The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and
	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 23, 2010
Signature & Title: /s/ Brian S. Shlissel
Brian S. Shlissel, President & Chief Executive Officer